Archives of “finance” tag

rss

Moody’s: Global economy will remain fragile in 2020

  
  Analysis
#  #  #  #  #  #  #

Moody’s weighs in with some commentary about the world economy

  • Global economy will remain fragile next year as risks to credit conditions rise
  • Rising political and geopolitical risks are exacerbating slow growth
  • That reduces economies’ abilities to respond to shocks
  • Trade uncertainty will continue to disrupt supply chains and weigh on investment
  • Overall global growth will remain lackluster amid deceleration in US and China
  • Recession risks will remain elevated in Europe and in the US
Adding that they do not expect a recession next year but recession risks are building amid a backdrop of trade policy uncertainty in the global economy.
They also mention that global interest rates will remain low and that yield curves are to remain flat for several years going forward.
I think this is pretty much the base-case scenario for the global economy at this point i.e. slow and sluggish growth with rising risks of things turning into something worse.
Any potential rebound in global trade and manufacturing conditions will likely take a few years to come about so if we can weather that storm, then perhaps the recession can will be kicked down the road again for a few more years.

Dollar weakness among the trends to watch for next year – Morgan Stanley

  
Analysis, Forex
#  #  #  #  #  #  #  #  #  #

Strategists at Morgan Stanley view that betting on a weaker dollar will be among the top trades for 2020

Dollar

In a client note detailing the trends to keep an eye out for next year, strategists at the firm view that the dollar is to be hit by stronger global growth outside of the US and dwindling portfolio inflows.

They argue that the greenback will fall against the pound, euro and kiwi dollar while also recommending to short the dollar against the Indian rupee in the EM space.
GBP/USD
Cable should “rally sharply by Q1 2020 as an orderly Brexit path becomes clearer, prompting foreigners to lift their GBP hedges and invest in undervalued GBP assets”. Target 1.40 in Q1 2020 before ending 2020 at 1.35.
EUR/USD
“Narrowing US-Europe growth differentials” and improving political factors should see the euro rally against the dollar. Target Q1 2020 and end of the year at 1.16.
NZD/USD
Recommends taking up a long position in the pair as they see Chinese and global growth improving. Target of 0.69 by mid-2020.

20 risks to markets in 2020 – Use them to make profit

  
  Analysis
#  #  #  #  #  #

Watch out for those risks

What exactly are the risks to the markets that you should pay attention to? The chief economist of Deutsche Bank Torsten Slok has prepared a list of top 20 risks to global markets in 2020. Each one of them may trigger a downtrend.

  1. Continued increase in wealth inequality, income inequality and healthcare inequality.
  2. Phase one trade deal remains unsigned, continued uncertainty about what comes after phase one.
  3. Trade war uncertainty continued to weigh on corporate capex decisions.
  4. Ongoing slow growth in China, Europe and Japan Triggering significant US dollar appreciation.
  5. Impeachment uncertainty & possible government shutdown.
  6. US election uncertainty; implications for taxes, regulation and capex spending.
  7. Antitrust, privacy and tech regulation.
  8. Foreigners lose appetite for US credit and US Treasuries following Presidential election.
  9. MMT-style fiscal expansion boosts growth significantly in US and/or Europe.
  10. US government debt levels begin to matter for long rates.
  11. Mismatch between demand and supply in T-bills , another repo rate spike.
  12. Fed reluctant to cut rates in an election year.
  13. Credit conditions tighten with more differentiation between CCC and BBB corporate credit.
  14. Credit conditions tighten with more differentiation between CCC and BBB consumer credit.
  15. Fallen angels: More companies falling into BBB. And out of BBB into HY.
  16. More negative-yielding debt sends global investors on renewed hunt for yield in US credit.
  17. Declining corporate profits means fewer dollars available for buybacks.
  18. Shrinking global auto industry a risk for global markets & economy.
  19. House price crash in Australia, Canada and Sweden.
  20. Brexit uncertainty persists.

US and China negotiators had ‘constructive discussions’ on Saturday

  
  Analysis
#  #  #  #  #  #  #  #

Steve Mnuchin and Robert Lighthizer spoke with Liu He on Saturday

Steve Mnuchin and Robert Lighthizer spoke with Liu He on Saturday
Chinese officials held a phone call with US counterparts at the White House’s request on Saturday, according to a statement from the Chinese Commerce Ministry.
The sides held “constructive discussions” on each other’s core concerns and agreed to maintain close communication, the statement said.
On Thursday, White House economic adviser Larry Kudlow boosted markets when he said negotiations are in the final stages though “not done yet.”
There has been no word on whether the US has accepted China’s demand that tariffs be scaled back. Nor has China signaled it will put a dollar figure on agricultural purchases; along with a host of other issues.

Wilbur Ross: US-China trade deal will be done ‘in all likelihood’

  
Analysis, Economy
#  #  #  #  #  #  #

Comments by US commerce secretary, Wilbur Ross

  • There is a very high probability that a deal will be reached
  • Chinese agricultural purchases and execution of those are an issue
  • Huawei not an appropriate player in the US 5G space
  • US will have deal with China or keep tariffs
Rinse and repeat, rinse and repeat. Yet, markets continue to lap it all up. USD/JPY touches a new day high of 108.78 and looks to challenge the 100-hour moving average now.
Looks like risk trades just got a shot in the arm ahead of US trading.

Japan’s top 20 startups surpass 1tn yen ($9.2 billion) in total value

  
  Analysis
#  #  #  #  #  #  #  #

Startups are continuing to grow in Japan, with a Nikkei survey finding the estimated corporate value of the 20 leading newer businesses increased 22% to exceed a combined value of 1 trillion yen ($9.2 billion) in the year to September. Growth is especially notable in the artificial intelligence and financial technology, or fintech, areas.

Technological innovations have increased startups’ corporate value, but signs of reservations among investors are also emerging in the wake of SoftBank Group-backed WeWork’s high-profile troubles. Masayoshi Son, who announced on Wednesday that his group’s net loss for the July-September quarter was 700 billion yen, admitted regretting a large investment in WeWork. “My investment judgment was poor in many ways,” he said.

Nikkei conducted the survey jointly with the Japan Venture Capital Association to estimate the corporate value of unlisted startups established up to 20 years ago as of the end of September. The valuation, calculated by multiplying the latest issue price of shares by their total number, corresponds to the market capitalization of listed companies.

The corporate value of 181 startups, among 189 firms that responded to the survey, was estimated, with the top 20 found to be worth a combined 1.19 trillion yen. Top-ranked Preferred Networks, an artificial intelligence developer, and two others were valued at more than $1 billion each. In 2018, there was only one so-called unicorn.

Using deep-learning technology, Preferred has been developing self-driving and other technologies jointly with auto giant Toyota Motor. The assessment of the company has grown also because it has expanded its partnerships with other companies, such as joint studies on automated control of oil plants with JXTG Holdings.

TBM, a Tokyo-based materials startup, was placed second in the survey. The company uses limestone to develop alternatives to plastics for items such as shopping bags, and it plans to start building its first overseas factory in China in 2020.

Fourth-ranked freee helps companies address labor shortages with its automated accounting software. The top 20 startups include seven fintech companies, reflecting strong expectations for innovations in financial services. The number of startups each valued at more than 10 billion yen increased about 30% to 63.

Unicorn candidates have also increased in sectors such as health care. According to U.S. research firm CB Insights, the U.S. has some 200 unicorns, or half the world’s total. Britain and India each boast dozens of them, but the number in Japan remains small.

TBM, which develops alternatives to plastics from limestone, attained the unicorn status. (Photo courtesy of the company)

The startup boom began earlier this decade as the digital revolution made headway, prompting large companies to expand investment in emerging innovative firms in a bid to avoid taking major risks alone.

One focal point ahead is the trend of investment, because the boom is partly attributable to the global glut of money. According to Japan Venture Research, privately held companies in Japan raised a total of 421.1 billion yen in 2018, a fivefold increase from five years earlier.

However, office-sharing WeWork’s woes raise the risk of a knock-on effect on other startups, which may find themseves under extra pressure to demonstrate their technology and business growth potential if they are to continue to attract investment.

Until recently, investors have tended to consider it enough for businesses to simply be expanding to warrant their support, but following the WeWork fiasco, there is a new focus on examining their governance of management thoroughly, according to Gen Isayama, general partner and chief executive of WiL, a U.S.-based incubator.

Softbank Group Chairman and CEO Son also referred to corporate governance during the earnings conference. “We will learn from our mistakes on WeWork, and create solid governance standards regarding business founders.”

Meanwhile, investment in startups in the U.S. has ballooned to 14 trillion yen. Amid the bubble-like situation, WeWork has faltered following the failure of its planned initial public offering, making investors more cautious about investment in new businesses.

Global Debt Tops $188,000,000,000,000 – Officially The Biggest Debt Bubble The World Has Ever Seen

  
Analysis, Economy
#  #  #  #  #  #

The world is now 188 trillion dollars in debt, and that number continues to grow rapidly each year.

It is a form of enslavement that is deeply insidious, because most of those living on the planet do not even understand how the system works, and even if they did most of them would have absolutely no hope of ever getting free from it. The borrower is the servant of the lender, and the global financial system is designed to funnel as much wealth to the top 0.1% as possible. Of course throughout human history there has always been slavery, and the primary motivation for having slaves is to extract an economic benefit from those that are enslaved. And even though most of us don’t like to think of ourselves as “slaves” today, the truth is that the global elite are extracting more wealth from all of us than ever before. So much of our labor is going to make them wealthy, and yet most people don’t even realize what is happening.

Let’s start with a very simple example to help illustrate this. (more…)

Moodys Downgrades UK Outlook To Negative On “Brexit Paralysis”

  
Analysis, Economy
#  #  #  #  #  #  #  #  #  #

Moody’s downgraded its outlook on Britain’s debt (currently rated Aa2) to negative from stable after the market close on Friday, saying Brexit had been a catalyst for an erosion in the country’s institutional strength, perceived “material deterioration” in UK governance, and that the country’s ability to set policy has weakened in the Brexit era along with its commitment to fiscal discipline.

The outlook cut represents a catch down to its competitors: the UK is currently rated AA by S&P and AA- at Fitch Ratings, with both companies having the UK on negative watch.

“It would be optimistic to assume that the previously cohesive, predictable approach to legislation and policymaking in the UK will return once Brexit is no longer a contentious issue, however that is achieved,” the ratings agency said adding that “the increasing inertia and, at times, paralysis that has characterized the Brexit-era policymaking process has illustrated how the capability and predictability that has traditionally distinguished the U.K.’s institutional framework has diminished.”

“The decline in institutional strength appears to Moody’s to be structural in nature and likely to survive Brexit given the deep divisions within society and the country’s political landscape,” Moody’s added.

The decision to put the UK on negative outlook even as Moody’s affirmed Britain’s Aa2 long-term issuer and senior unsecured ratings comes one month before an election that is likely to determine the future of Brexit. While the election will have a big impact on Brexit, this week has seen both sides escalate their spending pledges, drawing election battle lines with plans to end a decade of U.K. austerity. (more…)

Go to top